Car insurance rates by state, 2014 edition

The Great Lakes State has the highest average car insurance rates in the nation, according to Insure.com's 2014 study of auto insurance premiums.

West Virginia is No. 2, followed by Georgia at No. 3.

Michigan regained the top spot, which it held in 2011, from Louisiana. The two states have been No. 1 or No. 2 since Insure.com launched the study in 2010. This year Louisiana dropped to No. 7.

Ohio has the least expensive auto insurance rates, and Maine has the second-cheapest premiums.

Average car insurance premiums vary considerably by state for a variety of reasons – including the number of urban areas, traffic conditions, state insurance laws, the percentage of drivers who are uninsured, auto thefts and the number of car insurance companies competing for business.

Every state’s average rates are propelled by a number of factors. While it’s impossible to isolate one factor as being “to blame,” we asked insurance agents for their take on their states’ rates.

No. 1: Michigan – The 'blank check'

One of the biggest factors driving auto insurance rates in Michigan is the state's generous personal injury protection (PIP) benefits.

Under the state's no-fault auto insurance system, drivers must purchase PIP as part of their coverage. PIP pays for treatment of injuries for the driver, members of the household and passengers who don't have their own PIP coverage if any of them are injured in a car accident.

Ranking the states: Average car insurance premiums

1

Michigan

$ 2,551

2

West Virginia

$ 2,518

3

Georgia

$ 2,201

4

Washington, D.C.

$ 2,127

5

Rhode Island

$ 2,020

6

Montana

$ 2,013

7

Louisiana

$ 1,971

8

California

$ 1,962

9

New Jersey

$ 1,905

10

Florida

$ 1,830

11

Maryland

$ 1,810

12

North Dakota

$ 1,710

13

Connecticut

$ 1,638

14

Texas

$ 1,620

15

Alaska

$ 1,605

16

Massachusetts

$ 1,604

17

Delaware

$ 1,580

18

Oklahoma

$ 1,568

19

Colorado

$ 1,558

20

South Dakota

$ 1,557

21

Wyoming

$ 1,541

22

Alabama

$ 1,529

National average, all vehicles

$ 1,503

23

Kentucky

$ 1,503

24

Washington

$ 1,499

25

Pennsylvania

$ 1,440

26

Hawaii

$ 1,400

27

Arkansas

$ 1,399

28

Tennessee

$ 1,397

29

Nevada

$ 1,388

30

Mississippi

$ 1,385

31

New Mexico

$ 1,371

32

Illinois

$ 1,370

33

Minnesota

$ 1,360

34

Kansas

$ 1,358

35

Oregon

$ 1,333

36

Nebraska

$ 1,317

37

South Carolina

$ 1,316

38

Arizona

$ 1,222

39

Missouri

$ 1,207

40

Indiana

$ 1,202

41

Utah

$ 1,192

42

New York

$ 1,173

43

Vermont

$ 1,149

44

Virginia

$ 1,114

45

Wisconsin

$ 1,087

46

North Carolina

$ 1,060

47

Iowa

$ 1,058

48

Idaho

$ 1,053

49

New Hampshire

$ 983

50

Maine

$ 964

51

Ohio

$ 926

Dollar figures shown are an average of all 855 vehicles surveyed in the 2014 model year.

Some other states require drivers to carry PIP, too. What's unusual in Michigan is the guarantee of lifetime benefits if someone is seriously injured.

"If it's such a great system, why isn't anybody else copying it?" notes Jeremy MacDonald, president of the Michigan Association of Professional Insurance Agents and president of the Mid-Michigan Agency in Alma.

Other states cap the benefits – in New York, the benefits run out when treatment costs reach $50,000; in Florida, the cap is $10,000.

But auto insurance companies in Michigan must pay out the first $530,000 for medical treatment when someone is injured in a car accident. The threshold, which last year was $500,000, was bumped up by $30,000 for the 2013-2014 fiscal year. A state-created nonprofit called the Michigan Catastrophic Claims Association pays for any treatment that exceeds the threshold. The association charges an annual assessment for every insured vehicle, and each year the assessment goes up. Insurers pay the assessment, which then is passed onto consumers.

This year's assessment of $186 per vehicle is not included in the average rate shown in Insure.com's study, but the fact that insurers are on the hook for the first $530,000 plays a big role.

Lawmakers have proposed capping PIP benefits and setting limits on how much doctors and hospitals can charge for treatment, similar to the fee schedule for workers compensation benefits. Hospitals and patient advocates have successfully fought against them.

The benefits are great, but they are becoming unaffordable, MacDonald says. "The blank check is becoming a burden for all families."

Statewide, 20 percent of drivers are uninsured, MacDonald says, and the problem is even worse in Detroit, where the rate of uninsured drivers is estimated at 60 percent. Detroit is one of the most expensive cities in the nation for auto insurance, which also affects Michigan’s average rate.

"We've seen a growing trend of some agencies issuing seven-day insurance policies," says Jason Verlinde, vice president of the Michigan Association of Professional Insurance Agents and vice president of the Verlinde Insurance Agency in Richmond.

These seven-day policies are legal but clearly used as a way for vehicle owners to show proof of insurance to register their cars without paying for coverage after that, Verlinde says.

State officials have also seen a growing trend of fake auto insurance documentation. In a one-day snapshot of vehicle registration renewals in July, Secretary of State Ruth Johnson's office double-checked about 3,500 paper insurance certificates submitted by vehicle owners to Secretary of State branch offices across Michigan. More than 16 percent of them were fake or invalid. That led Johnson last year to launch the Fighting Auto Insurance Rip-offs task force, of which both MacDonald and Verlinde are members.

"We have bad guys who actually set up phony help desks so when our Secretary of State office clerks call to verify a policy, they reach a real person who vouches for a bogus auto insurance policy," Johnson said in a press release announcing the task force's creation.

Neither MacDonald nor Verlinde foresee much change in Michigan's auto insurance system. One bright spot, though, is the state has escaped any catastrophes. Consistent damage from catastrophes will push up a state’s premiums.

"That may help soften some of the increase for next year," Verlinde says.

No. 2: West Virginia – Deer in the headlights

West Virginia doesn't have the traffic nightmares that states with big metropolitan areas have, but that doesn't mean collisions don't occur. In this largely rural state, a driver is more likely to hit a deer than anywhere else in the country, according to data collected by State Farm.

Such accidents drive up premiums for comprehensive insurance, which among other things covers damage from collisions with animals.

"These are 200- or 300-pound animals. They can do some severe damage," says Michael Winter, a regional director for the Independent Insurance Agents of West Virginia and vice president of the Bray & Oakley Insurance Agency in Logan. "If you come to West Virginia in October or November, you wouldn't drive down the road a mile without seeing a dead deer. There are certain roads that look like a butcher's shop."

Amber Heater, personal lines manager at G.J. Garton Insurance Agency Inc. in Weston, says people joke that "someone must be putting something in the salt boxes" that hunters leave out for the deer. "They're just crazy," she says. One client was injured when a deer jumped off a roadside bank onto her car.

"She didn't even know what happened," she says. "She thought a tree fell on her car."

But the deer can't take all the blame.

A booming oil industry has lots of gravel trucks on the road, and that's led to a big increase in chipped and cracked windshield claims, Heater says. Crews lay gravel on top of the mud at oil well digging sites. While in transit, pebbles fly off the trucks and hit cars.

Another factor impacting rates is a large number of uninsured and underinsured drivers, Winter says.

"A lot of people get 30 days of insurance and let it lapse," he says.

That drives up the cost of uninsured/underinsured motorist coverage for everyone else. Sometimes that portion of the policy costs almost as much as the liability coverage, Winter says.

After accidents, meanwhile, "people in general are quick to pull the lawyer card," Heater says. Paying out a large number of personal injury lawsuits increases costs for insurance companies and, ultimately, their customers.

Finally, West Virginia gets its fair share of bad weather, including snow, wind, hail and flooding, which damage cars and make driving conditions treacherous, the agents say.

No. 3: Georgia – Previous savings evaporate

Georgia's rates have been on the rise recently partly because the market was so competitive there for many years, says Victor Hamby, immediate past president of the Professional Insurance Agents of Georgia and vice president of Hamby & Aloisio Inc. in Atlanta.

"Companies had underpriced risk to get market share, so finally the losses caught up with them," he says.

A rising number of claims for uninsured/underinsured motorist coverage might also be playing a role, he says. During and after the recession, many people lowered their liability limits to save money. When a driver causes a crash and doesn't have enough liability coverage, the other driver's underinsured motorist insurance pays out. Hamby says his office used to see one or two underinsured motorist claims a year. Now it sees three to four a quarter.

Lawsuits also drive up costs.

"Every city rapid transit bus going by has a picture of a personal injury attorney on it," he says.

And traffic in Atlanta has gotten worse over the years, too, leading to more accidents and claims.

Finally, although Maine gets more than its share of blustery winter weather, it's well outside Tornado Alley.

"We have snowstorms, but that doesn't clean out a bunch of cars all at once," White says

No. 51: Ohio – Lots of choice = best car insurance rates

The Buckeye State has consistently placed near the bottom of the list for most expensive states, but this year is the first time it has come in dead last.

Some 660 car insurance companies do business in Ohio, according to A.M. Best, with only Illinois and Texas having more auto insurance providers.

"I do think it helps having so many carriers," says Jeannine Giesler, president of the Professional Independent Agents of Ohio and chief operations officer of Diversified Insurance Service in Fremont.

The stiff competition, combined with the way insurance companies are regulated in Ohio, keep rates affordable and stable, says Mary Bonelli, a spokesperson for the Ohio Insurance Institute.

Car insurance rates have remained relatively low in Ohio for more than a decade. According to data from the National Association of Insurance Commissioners and estimates by the institute, the average amount consumers will pay for auto insurance in Ohio this year is the same as it was 12 years ago.

Methodology

Insure.com commissioned Quadrant Information Services to calculate auto insurance rates from six large carriers (Allstate, Farmers, GEICO, Nationwide, Progressive and State Farm) in 10 ZIP codes per state. Rates were compiled in January 2014.

More than 850 models are included in the 2014 study. We then averaged rates for all vehicles surveyed in each state to create the rankings. Rates are for comparative purposes only within the same model year.

Rates are based on full coverage for a single, 40-year-old male who commutes 12 miles to work each day, with policy limits of 100/300/50 ($100,000 for injury liability for one person, $300,000 for all injuries and $50,000 for property damage in an accident) and a $500 deductible on collision and comprehensive coverage. The hypothetical driver has a clean record and good credit. The rate includes uninsured motorist coverage. Actual rates will depend on individual driver factors.